May 25, 2024
Class Action Lawsuit Targets Binance and CEO Changpeng Zhao Over Alleged Market Manipulation
Policy & Regulation

Class Action Lawsuit Targets Binance and CEO Changpeng Zhao Over Alleged Market Manipulation

Against Binance, a class action lawsuit was launched. Attempting to dominate the cryptocurrency market by damaging its rival FTX, the US and Binance CEO Changpeng Zhao were sued on October 2 in the District Court of Northern California, citing multiple breaches of federal and California law on unfair competition. Nir Lahav, who is only named as a California resident, filed the lawsuit.

The posts Zhao made on Twitter (now X) in early November, just before FTX collapsed, are in question. The postings were published in connection with the defendants’ choice on November 6 to sell all of their shares in the FTX utility token FTT (FTT). According to the plaintiffs, up to 5% of all FTT tokens were held by Binance.

Zhao revealed the next day that Binance had signed a letter of intent to purchase FTX but that the transaction had been abandoned one day later.

According to the suit:

“Zhao publicly disseminated this information [on the withdrawal of the acquisition offer] on Twitter and other social media platforms to hurt FTX Entities that ultimately lead to a rushed and unprecedented collapse of FTX Entities.”

After that, it started its case by defending the Securities and Exchange Commission’s crypto regulations and citing, among other things, the Howey and Reves rulings of the Supreme Court.

It went on to claim that Zhao’s Nov. 6 tweet, “Due to recent revelations that have come to light, we have decided to liquidate any remaining FTT on our books,” was false and misleading since Binance had already sold its FTT holdings and the post was “intended to cause the price of FTT in the market to decline.”

The plaintiffs found evidence for their claim in the same post by Zhao, where he wrote, “We are not against anyone. But we won’t support people who lobby against other industry players behind their backs.” The last phrase was interpreted by the plaintiffs as meaning that Binance was against FTX CEO Sam Bankman-Fried’s “regulatory efforts.”

The lawsuit claims that Zhao’s acquisition proposal wasn’t presented sincerely and that the incident will “ultimately lead” to FTX’s demise.

“Zhao’s tweet resulted in the FTT price declining from US 23.1510 to US 3.1468. This significant drop plummeted FTX Entities into bankruptcy without giving an opportunity or chance to FTX Entities’ executives and board of directors a chance [sic] to salvage the situation and put in safe guards to protect its clients and end-users.”

Based on seven charges, the lawsuit claimed disgorgement of ill-gotten earnings, monetary damages, and court expenses. The lawsuit noted that “the plaintiff believes there are thousands of members of the proposed class.”

Both Binance and FTX are presently the targets of SEC proceedings, the lawsuit stated. On October 4 in New York, the criminal prosecution against Bankman-Fried will start. In the same tweet that is included in the lawsuit, Zhao responded to potential charges of unfair competition. Regarding any notion that this is a move against a rival, he stated, “It is not.

However, his comments did not put an end to rumours in the crypto world to that effect. For weeks later, the CEOs of the cryptocurrency exchanges spat insults on Twitter.

Image: Wallpapers.com

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